A company's capacity to quickly and effectively execute business strategy is, in itself, a competitive differentiator, one that is highly correlated with positive market performance. But this ability isn't common--only one-third of respondents to the most recent iteration of i4cp's annual Critical Human Capital Issues study indicated that their organizations are highly effective at executing strategy.
To explore how high-performance organizations successfully execute strategy, i4cp conducted a separate survey of 272 organizations on 53 human capital-related execution tactics, examining those with the greatest positive influence on market performance. What our research found is that the key to strategy execution effectiveness is alignment. But while much has been written about the importance of alignment between structure and process, our research reveals that alignment of the workforce is often overlooked.
Make strategy execution a primary focus, not an afterthought
To excel in the market, companies must be able to turn great strategy into great performance. The first key to this is to create and communicate strategy that is very clear, not ambiguous. The strategy should be defined and reinforced with focus on exactly what needs to be done in order to execute on the strategy. Put another way, while strategy always starts with a plan, i4cp's research shows that every strategic plan should be accompanied by an execution plan that takes into account four instrumental and interrelated elements: Market, Culture, Leadership, and Talent.
Four key interdependencies of Strategy
Over the past several decades, i4cp's research has consistently shown that high-performance organizations excel in five core areas we call domains: Market, Culture, Leadership, Talent and Strategy. Each of these domains works in conjunction with one another to drive high-market performance and should not be viewed in isolation. The following outlines how strategy is supported by the other four domains and reveals areas where Human Resources should intervene to ensure organizational strategy is developed and executed successfully:
1. Align strategy with the demands and realities of the Market (and customers) the organization serves
Have a clear focus on the customer. Irrespective of the number of strategies a company is executing, i4cp's survey listed nine common strategic goals. Of these, only three were highly correlated with execution effectiveness and market performance: being an innovative industry leader, a quality leader, and being customer focused.
i4cp's People-Profit Chain research reveals that high-performance organizations are 2.9x more likely to align the organization's structure and process to better serve customers. From a people perspective, this can include training leaders on the cultures and customs of markets served, as well as soliciting feedback from customers on what is working and what isn't, and translating that back into hiring and development plans.
Recent history offers an example of how moving away from customer focus can have disastrous consequences. When Ron Johnson became CEO of JC Penney in 2011, his focus on creating an upscale, Apple-inspired storefront was clearly not in line with customer expectations. By October of 2013, JC Penney stock was trading near its all-time low--Johnson's departure 17 months after his appointment was a consequence of losing focus on the customer.
2. Make sure strategy is supported by the Culture of the organization, including its values
Create and maintain the right cultural fit for the strategy. When companies get the culture right--by aligning it to the strategy--there is a much higher rate of success than when culture is not aligned to strategy. The importance of culture is well understood in the business community, but understanding how it can affect the execution of even the most well-crafted business plan is critical.
For example, in response to the expectations of its customers and employees, who are accustomed to high-speed connectivity and real-time collaboration, i4cp member company Colliers International determined it needed to establish a culture of collaboration to enhance its referral program, innovation, and client engagement.
i4cp's People-Profit Chain research shows how high-performance organizations are 2.8x more responsive to changes in the marketplace than low-performers. These organizations work both from the inside-out (in this case, applying knowledge of readiness in terms of current supply of human capital versus anticipated demand) and the outside-in (using knowledge of external factors, including what the market demands).
3. Ensure Leadership behaviors--of both executives and middle management--are consistent with the strategy
Translate organizational goals into actionable deliverables. Taking a plan and turning it into methodical steps is the key, along with accountability. Something as simple as "Aligning customer goals to performance management objectives" sounds fine on paper, but what does this really mean and what does it look like? Are there actionable steps that need to take place to make this happen? How the plan creates activity is something that needs to be developed as the plan is being shaped, not after.
Demonstrate the ability to quickly and effectively lead responses to new strategic opportunities. An example of this is when leaders empower their employees to make decisions. Forthcoming research from i4cp on building an agile culture shows this to be a key practice to improving agility effectiveness.
Leadership at every level has the strongest relationship with an organization's ability to execute its strategy. Agility, adaptability, open-mindedness--whichever adjective you choose--this is the key differentiator between success and spectacular failure.
4. Put Talent practices in place that link individual and organizational goals and objectives
And ensure they are consistently communicated throughout the organization. The three talent practices most highly correlated with market performance and strategy execution effectiveness shared one common denominator: alignment to company goals, either through hiring, training, or rewards.
Use a variety of communication tools. Visuals and graphics, leader-to-group communications, and manager to staff one-on-one communications are all correlated to strategic effectiveness or market performance (or both in the case of visuals and graphics). The more employees understand the plan, the more likely it is to create an engaged and feedback-friendly workforce.
Make strategy execution an organization-wide effort. Too often, the strategic plan is considered the exclusive purview of the C-suite. However, data suggests that having the entire company onboard and engaged with the strategic plan is a far better approach. Examples of this includes ensuring leaders take a bottom-up approach to creating goals, as opposed to simply mandating goals from the top-down, as well as tying a portion of everyone's incentive compensation to key organizational objectives.
The one area that hasn't been discussed, but shouldn't be overlooked, is speed. When there are two companies with the right business strategies and with successful execution plans, the company that gets its plan implemented first will come out the winner. The findings outlined within this article will help expedite the execution of strategy. However, this also speaks directly to an organization's ability to be agile; to sense, identify, respond to, adapt to, and initiate change. All of which is the focus on i4cp's upcoming research on building a culture that supports organizational agility.
Because the topics of Strategy Execution and Organizational Agility are so critical to business success, i4cp is launching a three-month series of articles, webinars and regional events dedicated to building a high-performance organization.